Why is it important to consider the industry of a business when comparing yearly working capital?

Evaluating performance benchmarks is crucial when considering the industry of a business in relation to its yearly working capital because each industry has its own standards and metrics for performance. Different sectors have varied capital requirements, turnover rates, and liquidity norms, which shape how working capital is managed and assessed.

For instance, industries that have a quick inventory turnover may maintain lower working capital levels compared to those that have long production cycles or higher inventory turnover. By comparing a business to specific benchmarks within its industry, you can gain insights into how well it is managing its working capital relative to its peers. This comparison helps in identifying if a company is efficiently utilizing its resources, thus providing a clear picture of its operational performance and financial health relative to industry standards.

While understanding customer behavior, assessing business risks, and identifying market trends are important, comparing performance benchmarks offers direct insights into the operational efficiency and financial practices tailored to industry-specific contexts. This makes option C the most relevant choice in the context of analyzing yearly working capital in relation to industry standards.